Geothermal systems a household favorite thanks to tax credit

Friday

Aug 28, 2009 at 12:01 AMAug 28, 2009 at 4:09 PM

Using the ground instead of outside air to provide heating, air conditioning and, in most cases, hot water, geothermal technology has been around since the 1950s, but it’s seeing a surge in popularity.

Sandy McCollum

Using the ground instead of outside air to provide heating, air conditioning and, in most cases, hot water, geothermal technology has been around since the 1950s, but it’s seeing a surge in popularity.

The systems are better than ever, and they make a real difference in utility bills. Then there’s a recent reclassification by the federal government that makes a geothermal system more affordable to install.

While some other energy-saving systems top out at $1,500 back to the consumer, geothermal doesn’t. Geothermal systems have been classified as “Residential Renewable Energy,” and that reclassification means they qualify for a 30 percent tax credit, according to the Internal Revenue Service. That’s tax credit, not deduction, on all installation costs — product plus installation — with no upper limit.

So, what does a geothermal system look like and how does it work?

The first thing you notice with a well-installed geothermal system is nothing. There is no heating/cooling unit outside. No whoosh of a heating and cooling system turning on and off. No annoying air conditioning systems making noise while you’re sitting on your deck or porch or out in the yard. No day-to-day swings in inside temperatures.

Yes, the geo-thermal heating cooling system is a big fat nothing, until you talk to someone who owns one.

Ron and Amy Mihalich built their home in 2005. They installed a geothermal system even before all the tax credits because they looked into the future and decided they wanted to be able to plan their utility costs.

Their house is in rural Sangamon County, where natural gas service isn’t available, so propane was their only option.

But the price of propane wasn’t something they had any control over.

“When I plan my retirement, instead of having to say ‘well, in December I’ll have to plan on $400 a month for propane,’ I want to plan what my average electric will be all the way through,” Ron Mihalich says.

While neighbors are paying gas and electric bills, Mihalich gets his heat, cooling and hot water all through his geothermal system.

His only bill is for electricity with Ameren, and his highest electric bill in a 4,000-square-foot home, where he runs three refrigerators, has been $249.

It’s a nice contrast to the bills to his previous 1,800-square-foot home, where he says it was not uncommon to have $300 gas bills plus $50-60 electric bill.

Mihalich says he has a four-ton unit for his home with four deep wells, but you just have to take his word on its location.

‘Right out where this tree is there are four wells, and they run down 150 feet and the line is ¾ of an inch,” Mihalich says.

There is nothing visible above ground.

“One of the lines comes out of the system in the house; it goes down the first well, comes up, goes down the second well, comes up, goes down the third and the fourth and then back into the house.”
In the winter, the system takes heat from the ground and sends it into the house. In the summer, it’s reversed. The system takes heat from the house and sends it outside.

Bill Swan, a technician at Weidner Refrigeration Inc., has been with the company about nine years. He’s seeing a surge in geo-thermal popularity. Part of it is the government tax credit that helps install the system. Surprisingly, another part is the economy.

“We do new houses, but we’ve been doing quite a few retrofits since the economy is down,” Swan says.

“People are staying in their old homes and trying to make them more energy efficient.”

Weidner Refrigeration owner Dave Weidner confirms that.

“The feeling is if you have a nice house, you’re not going to move out of your house; you’re not going to buy a new house, but you can spend a little money on the house and make it more comfortable, lower your bills, just make your home better. Out of 80 geothermal systems we did last year, we probably did 60 retrofits,” Weidner says.

Swan says everything they do has numbers to back it up. Weidner has a computer program that can actually predict what a person’s energy costs will be and see what the payback is for geothermal, air-source heat pump or standard gas heat.

“We don’t guess on anything. We measure the house and run a heat load — a heating and cooling analysis on the house. It tells us how much furnace or how much heat we need at whatever outdoor temperature and indoor temperature to run the house. Same with the cooling,” Swan says.

“We run the load on a room-to-room basis so when we lay out the duct system we know how much air flow is needed in every single room of the house, and we get every room within one degree provided our recommendations are followed.”

While the systems are pretty standard, the quality of installation is everything.

“If it’s installed incorrectly, the person will never be happy with it, Swan says.

“It won’t work right. It will sound like a tractor in your house. There will be no control from room to room — the temperature could be 5-10 degrees off.”

“Just because you’ve got geo, doesn’t mean you have a system like Ron Mihalich,” Weidner says.

The system runs most efficiently when you don’t adjust the thermostat. Amy Mihalich says her favorite thing about the system is that you just find a temperature you like and keep it.

The Mihaliches keep their inside temperature at 74 degrees in the summer, 72 degrees in the winter. While they never plan to move, Ron Mihalich thinks the geothermal system would be a selling point if he did.

Geothermal rebate
Consumers who install solar energy systems (including solar water heating and solar electric systems), small wind systems, geothermal heat pumps and residential fuel cell and microturbine systems can receive a 30 percent tax credit for systems placed in service before Dec. 31, 2016. The tax credit is 30 percent of the total cost (product plus installation) with no upper limit. Installation costs include “labor costs properly allocable to the onsite preparation, assembly or original installation of the property and for piping or wiring to interconnect such property to the home.”
— Source: energystar.gov

Tax credit
A tax credit is a dollar-for-dollar reduction in the tax liability. For each dollar of tax credit, there is a dollar reduction in the tax liability.
— Source: IRS.gov

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